Articles

1. Back charge. This term, which may also be expressed as “backcharge” or “back-charge”, is often a shorthand used for a variety of deductions that the upstream contracting party (often the main contractor or employer) wishes to claim against the downstream contracting party (often the subcontractor). We usually see this in relation to claims by the upstream contracting party for:
   
   1.1. Goods and/or materials purchased for and on behalf of the downstream contracting party, which the downstream contracting party was originally supposed to purchase / supply; or
   
   1.2. Costs incurred in carrying out rectification work in respect of defects in the downstream contracting party’s works, which the downstream contracting party had failed to, or refused to, rectify.
   
   
2. Often, the upstream contracting party will first give notice to the downstream contracting party before incurring such costs. However, sometimes, due to work exigencies, the upstream contracting party may not have the time to notify the downstream contracting party before such costs are incurred. Or perhaps there were lapses or oversight by the project staff, such that the notices were not issued on time.
   
   
3. In such cases, is the lack of notice fatal to a subsequent back charge by the upstream contracting party against the downstream contracting party? Or is the lack of notice not fatal, and would only affect the quantum (of damages) that may be recovered?
   
   
4. The recent case of DMD v DMC [2025] SGHC 151 sheds light on this issue.

  1. Background

5. The claimant, DMC, was the main contractor engaged for a project to do road markings,¹ and appointed the defendant, DMD, as its sub-contractor for the painting of road markings by two separate contracts.²
   
   
6. The contract for road markings in the East sector was stated to have a contract sum of $10,186,054.00 (excluding GST), and the contract for road markings in the West sector was stated to have a contract value of $9,808,289.00 (excluding GST).³
   
   
7. Disputes arose between the Parties, and DMC commenced a suit against DMD claiming $3,391,652.86 (excluding GST).⁴ DMD denied the claims⁵ and counterclaimed against DMC for $1,212,775.12 (including GST).⁶
   
   
8. A total of ten (10) issues fell for determination by the High Court.⁷
   
   

  2. Notice before Back Charges?

9. In this article, we will focus on the first issue to be determined by the High Court, i.e., was DMC required to give notice to DMD to do work in specific locations, before DMC was entitled to back charge DMD for work not done by DMD in these locations.⁸ 
   
   
10. This sort of legal issue is, of course, not new. Similar issues have arisen for consideration before the Singapore Courts in the past.
    
    
11. It suffices to refer to just two decisions that were addressed in DMC v DMD:
    
    11.1. Vim Engineering Pte Ltd v Deluge Fire Protection (S.E.A.) Pte Ltd [2023] SGHC(A) 2 (“Vim Engineering”); and
    
    11.2. Pro-Active Engineering Pte Ltd v Prime Structures Engineering Pte Ltd [2023] SGHC 205 (“Pro-Active”).
    
    
12. The Appellate Division in Vim Engineering⁹ endorsed B.R. Burrows J’s “pragmatic approach” at [28] of Impact Painting Ltd v. Man-Shield (Alta) Construction Inc [2018] AWLD 582 (“Impact Painting”) as the correct approach to be adopted in determining whether a party claiming a back charge is entitled to impose it.¹⁰ We set the approach out below:
    
    “In my view, the onus is on the party claiming a back charge to prove that:
    
    1. The back charge is for an expense actually, necessarily and reasonably incurred by the party claiming the back charge.
    
    2. By the terms of the subcontract, or by some other agreement between the parties, the charge is one, or is in relation to some task, for which the subcontractor undertook responsibility.
    
    3. The general contractor incurred the expense because the subcontractor defaulted on the responsibility to which the charge relates.
    
    4. Prior to incurring the charge, the general contractor gave notice to the subcontractor of its default and a reasonable opportunity to cure it.”
    
    
13. And in Pro-Active, Vim Engineering was relied upon to argue that the back charges in dispute in Pro-Active were not proven,¹¹ and the High Court proceeded to examine if the back charges met the four requirements as set out in Impact Painting to determine if the back charges could be imposed.¹²

  3. DMD argued no notice

14. With the above in mind, it should come as no surprise that DMD argued that the failure to give notice by DMC was fatal to DMC’s claim for back charges.¹³
    
    
15. Specifically, DMD argued that “no work schedule or written notice was given to DMD to carry out road marking works at the specific locations that DMC is claiming backcharges for.”¹⁴

 4. DMC argued not required to give notice

16. DMC disagreed with this argument from DMD, and made two submissions in response:
    
    16.1. Firstly, in the contracts between the Parties, there was no requirement for DMC to give such notice before its entitlement to back charge arose.¹⁵
    
    16.2. Secondly, in any event, DMC did issue multiple correspondence recording DMD’s delays and lack of progress, and that DMC would have to intervene.¹⁶
    
    
17. We will focus on the first issue, as it is a question that has more general relevance.

 5. High Court agreed notice was not required

18. The High Court agreed with DMC’s argument, accepting that DMC was not required to give notice before DMC was entitled to back charge DMD.
    
    
19. The High Court highlighted that it is important to examine the analysis in Vim Engineering in greater detail, and in particular, [80] and [81] of Vim Engineering. We excerpt these paragraphs of Vim Engineering below:
    
    “80 The requirement for notice to be given in relation to defects clauses is a fairly standard procedure adopted in construction contracts where notice is given downstream to the contractor (or in the present case, the subcontractor) thereby giving the contractor an opportunity to cure or remedy the defect. However, while failure to comply with a stipulation to provide notice in a defects clause may preclude an employer from relying on the defects clause as against the contractor (see Keating at para 11-031), in the absence of clear and express words or by a clear and strong implication from the words used, the employer’s right to damages in respect of the cost of repairs is not extinguished (see Pearce and High v Baxter [1999] BLR 101 at 104, cited with approval in Management Corporation Strata Title Plan No 1933 v Liang Huat Aluminium Ltd [2001] 2 SLRI 91 at [21]).
    
    81 The requirement of notification is necessary to balance the consequence that any other party who carries out such remedial work, is likely to do so at a greater cost. This is because the contractor is in the best position to carry out such remedial work, if justified, at the lowest cost. There is an element of the upstream party having to take reasonable steps to mitigate its damage. Where no notice is given and such remedial work is carried out, it is open to the subcontractor to argue that it should not be liable for the greater cost of remedial work but only to the lower cost it would have incurred in carrying out such remedial works if due notice had been given.”
    
    (emphasis added in bold to refer to portions referred to by the High Court in DMC v DMD)
    
    
20. This sets the tone. The above paragraphs make clear that:
    
    20.1. The lack of notice is not fatal to the claim by the upstream contracting party against the downstream contracting party in respect of defects in the works done by the downstream contracting party; and
    
    20.2. It simply converts the issue into one of quantum (of damages).
    
    
21. The High Court then found that Vim Engineering is distinguishable as “the material clause imposed a requirement to notify the subcontractor of the defective or non-conforming subcontract work… In contrast, there is no requirement in Section 2 cl 24 for notice to be given before backcharges can be imposed.”¹⁷
    
    
22. We set out the relevant clause in Vim Engineering below:¹⁸
    
    “19. BACK-CHARGE
    
    19.1 If, under the provisions of this Subcontract, [1] [Vim] is notified by [Deluge] to correct defective or non-conforming Subcontract works, or to perform Subcontract works in accordance with (and so as to comply with) the Subcontract’s Programme, and [2] [Vim] states or, by its actions, indicates that it is unable or unwilling to proceed with the Subcontract works or corrective action or otherwise fails to do so in a reasonable time, [3] [Deluge] may, upon written notice, perform or procure the performance of the redesign, repair, rework or replacement of nonconforming or non-performed Subcontract works by any reasonable means available at [Vim’s] cost including any cost for supervision and/or overhead.”
    
    (our emphasis added; numbers in square brackets in bold added)
    
    
23. As can be seen from the emphasized portions above, the phrasing of the above clause in Vim Engineering is important. The Appellate Division in fact made this clear in Vim Engineering, stating that:
    
    23.1. “Under cl 19.1, the first step is for Deluge to notify Vim of the defective or non-conforming Subcontract work …”;¹⁹ and
    
    23.2. “If, after it has been notified of an alleged defect, Vim states in writing or by its actions indicates that it is unwilling to remedy the defects or does not do so within a reasonable time, then Deluge may proceed to the next step, viz, give written notice.”²⁰
    
    
24. In other words, the absence of this two-step mechanism in the clause in DMC v DMD was a material fact, such that, contractually, the failure to give notice by DMC was not a bar against it back charging DMD.

  6. General right to damages 

25.  Perhaps even more importantly, the High Court held that even if there had been a notice requirement which DMC had failed to comply with, it would not “extinguish DMC’s general right to damages in respect of the costs of repairs, in the absence of clear and express words in the contract or by clear implication from the words used”.
    
    
26. This is an important point.
    
    
27. As set out in the seminal decision of Gilbert-Ash (Northern) Limited v Modern Engineering (Bristol) Limited [1974] AC 689, in construing contracts, “one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption”.
    
    
28. This has been endorsed in Singapore, such as, e.g., in the case of Thio Keng Thay v Sandy Island Pte Ltd [2019] SGHC 175. 
    
    
29. Bearing the above in mind, generally, if a downstream contracting party’s works are defective, as a question of law, it will be difficult for the downstream contracting party to argue that the failure by the upstream contracting party to give notice of its intention to carry out the defects rectification work and back charge the downstream contracting party of the costs of such work is fatal to such a “back charge” claim.
    
    
30. This is because it would be a highly unusual contract for the upstream contracting party to give up such a valuable right.  

  7. Conclusion

31. Upstream contracting parties will no doubt welcome DMC v DMD. It makes clear that the lack of notice is not (always) fatal to a back charge claim.
    
    
32. Having said that, it would be remiss not to qualify that with the lawyer’s answer of “But it depends” – it is conceivable that in certain situations, the failure to give notice may be fatal to such a claim, be it due to the contract in question, or as a question of damages.
    
    
33. We also note that, while it is quite beyond the scope of this article, the cases addressed above are disputes before the Singapore Courts. Back charges have to be handled quite differently when it comes to adjudications under the Building and Construction Industry Security of Payment Act 2004.
    
    
34. It suffices to state at this juncture that parties should consider quite carefully whether the back charges are claims for damages, loss and expense (or set-offs), or are they being raised in the nature of valuation of claims for work done and goods, services and/or materials supplied.

Contributed by:

Footnotes

¹ DMC v DMD [1]

² DMC v DMD [1]

³ DMC v DMD [4]

⁴ DMC v DMD [10]

⁵ DMC v DMD [11]

⁶ DMC v DMD [12]

⁷ DMC v DMD [13]

⁸ DMC v DMD [14]

⁹ Vim Engineering [102]

¹⁰ Vim Engineering [102]

¹¹ Pro-Active [101]

¹² Pro-Active [1012]

¹³ DMC v DMD [15]

¹⁴ DMC v DMD [15]

¹⁵ DMC v DMD [16]

¹⁶ DMC v DMD [16]

¹⁷ DMC v DMD [21]

¹⁸ Vim Engineering [74]; [84]

¹⁹ Vim Engineering [84]

²⁰ Vim Engineering [85]